Housing in Sweden is Getting Cheaper Due to Rising Electricity Prices

In August 2022, the HOX Sweden house price index decreased by 0.2% compared to the previous month, according to Valueguard. The drop was smaller than in recent months, as apartment prices rose by 0.6%. House prices, which rose sharply during the pandemic, fell by 0.6%.

Reasons. The data came a day after Sweden's central bank announced a record-high interest rate hike, which will increase costs for borrowers. In the coming months, electricity prices may become an even bigger headache, which is expected to rise to unprecedented levels in winter. This development may affect the demand for single-family homes.

Quote. "Even if Riksbank raises the rate even higher, electricity will be even more expensive for many homeowners than mortgage rates," said Marcus Svanberg, executive director of Lansforsakringar Fastighetsformedling, one of Sweden's largest real estate agencies. "At the same time, tariff growth continues, and we have not seen a peak in either inflation or electricity prices."

Context. August is traditionally a strong month for the Swedish housing market, and seasonally adjusted prices as a whole fell by 1.2%, and single-family homes fell by 1.8%. Valueguard's report is somewhat more ambiguous than the data for the past six months, Nordea analyst Gustav Helgesson said in a note to clients. He noted that apartment prices in Stockholm recovered, while prices in Malmo, the country's third largest city, continued to fall.

Nordea expects house prices to decline by about 15% from their peak at the beginning of this year, and Valueguard data suggests a decline of 8.7%. The Riksbank on Tuesday forecasts a deeper drop of 18% than before.

Also read:
Apartment Prices Are Falling in Sweden
Step-by-step Procedure of Real Estate Transactions in Sweden

Source: Bloomberg
Photo by Drahomír Posteby-Mach on Unsplash

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